VietNamNet Bridge – The domestic petroleum market is expected to become more competitive and closer to world standard following the issuance of Decree 83.

A customer purchases petrol at a filling station in Tan Binh District, HCM City. The domestic petroleum market is expected to become more competitive and closer to world standard following the issuance of Decree 83 that takes effect on November 1.

The new decree, which takes effect on November 1 and replaces Decree 84 of 2009, creates a legal framework for the domestic market to operate in accordance with market rules.

Phan The Rue, chairman of the Viet Nam Petroleum Association (VINPA), told a conference here last week that under the new decree, distributors could purchase petrol from several wholesale businesses at different prices and calculate and decide on their own retail prices. The new decree will also admit merchants and franchisees.

Under current regulations, import and distribution enterprises could raise or lower selling prices by less than seven per cent. With the current price at VND24,000 per litre, they could adjust the selling price to a maximum of VND1,600 per litre.

If the new decree takes effect, enterprises will be allowed to raise the price by no more than three per cent for each adjustment while the next adjustment must be made at least 15 days after the previous one.

The three-per cent price increase, or VND700 to 750 per liter, is viewed as bearable for the economy and consumers.

To keep petrol prices stable, distributors have asked the Government to refrain from raising import tariffs for six months to one year.

Bui Ngoc Bao, chairman of the Board of Management of Viet Nam National Petroleum Group (Petrolimex), said petrol management was done in accordance with world pricing trends, and allowing traders to adjust prices within three per cent would ensure flexibility while abolishing price surges that could shock the economy.

He added that the adjustment was suitable in terms of market supervision and price stabilisation, as well as conformity to world prices.

The new decree will not limit the number of price decreases and will allow reductions that are less than 15 days apart, Bao noted.

However, economists are sceptical about the kind of market transparency that the new decree will bring.

Ngo Tri Long, former deputy head of the Finance Ministry's Institute for Market and Price Research, said that allowing price increases of up to three per cent without the permission of management agencies could make wholesalers conspire to increase prices.

Long also noted that the new decree stipulated three levels of price adjustment and required better co-operation between the Ministries of Industry and Trade and Finance to ensure that enterprises follow the market's price mechanism.

Foreign investors interested

Rue has predicted that many foreign investors would flock to Viet Nam when it begins opening its market in 2018.

He said the number of foreign investors showing interest in the Vietnamese petrol market was higher than the number of foreign investors showing interest in its retail market.

He added that the market could witness a new trend: foreign investors would use their huge financial resources to buy available petrol station systems instead of building new ones.

The association calculated that each petrol station would cost around US$1million. However, the transferring price for foreign investors could reach up to $1.2 million, making domestic enterprises ready to sell to foreign companies.

Viet Nam's petrol market has huge potential because most filling stations were located in urban areas and remain limited in mountainous regions.

Given a 90-million population and a five-per cent economic growth rate per year, the country should have a petrol growth of 10 per cent instead of just the current seven per cent, Rue added.

Petrol, LPG prices to remain stable

The Finance Ministry's Pricing Department has predicted that the prices of petrol and liquidified petroleum gas (LPG) would remain stable until the end of this month.

Department estimates showed that total domestic demand for LPG in the first half of this month was 57,500 tonnes, which was similar to that of the same period last month.

Domestic LPG supply from Dinh Co and Dung Quat was stable at 28,000 tonnes while supply from imports was 29,500 tonnes, meeting 51.3 per cent of total demand.

In the beginning of this month, the selling price for gas was reduced by VND7,000 to VND7,392 per 12-kilo canister because of decreasing world market prices.

Domestic petrol prices were likewise reduced last week. The department said the world petrol price would also remain stable in the second half of this month.

VNS/VNN